March 29 (Bloomberg) -- The share of U.S. dollars in South
Korea’s $327 billion worth of foreign-exchange reserves fell
last year to the lowest level since the country started
disclosing the contents of the portfolio in 2007.

Dollar holdings dropped to 57.3 percent of reserves from
60.5 percent in 2011, the Bank of Korea said in its annual
report for 2012 released today. The ratio has fallen four out of
five years since 2007, when it was 64.6 percent.

The decline in dollar investments by Asia’s fourth-largest
economy underscores a shift among reserve managers to diversify
assets, with China’s yuan and gold among the beneficiaries. The
reserves, the nation’s major safeguard against a foreign
currency crisis, rose from $306 billion at the end of 2011, a
gain of 6.9 percent.

“The dollar share fell last year as we bought gold and
Chinese assets while the euro and pound appreciated,” the
central bank said in a statement.

The central bank boosted the proportion of equity
investments to 5.7 percent last year from 5.4 percent in 2011,
it said. Holdings of foreign government bonds rose to 38 percent
from 36.8 percent, the BOK said.

South Korea now holds government bonds issued by countries
including the U.S., Japan, Canada, and Germany, Kang Sung Kyung,
a director at the bank’s Reserve Management Group, told
reporters today in Seoul.

“Our dollar holding share is not much different from the
levels at other central banks,” Kang said.

Chinese Bonds

The Korean central bank began to buy Chinese bonds and
stocks in 2012 as part of plans to diversify its reserves.

The BOK received approval from the People’s Bank of China
to buy bonds and obtained a license to invest in Chinese stocks
as a Qualified Foreign Institutional Investor, or QFII, last
year.

The BOK has used a “considerable amount” of its 20
billion yuan ($3.2 billion) limit for purchases of Chinese
government and central bank debt, Choo Heung Sik, head of the
South Korean central bank’s reserve management group, said in an
interview last November. In addition, a $300 million allocation
for Chinese stocks has been fully utilized, he said.

South Korea has also boosted its gold holdings. In
February, the country added 20 metric tons, a rise of 24
percent, for a total of 104.4 tons.